(This post is just an excerpt from the conclusion and by all means read it all. Michael Hudson has been for me a source for insights for many years. Furthermore, there's a biblical connection - Forgiveness of debt is not exactly an original or new idea - https://crushlimbraw.blogspot.
............Robinson: So taxes and then shifting their basis. I see how it would lessen the burden on the poor and also increase the wealth of governments, both municipal and national going forward. But beyond freeing up the poor’s capital, I don’t see how it would have an immediate effect on the mountain of debt that the poor have in the form of mortgages or student loans or credit card and medical payments. And this leads me to wonder whether you think there ought to be massive debt write-offs or debt payments made for citizens on the behalf of the government?
Michael: That is the most controversial part of my policy. Yes, if you do not write down the debt, then you cannot re-industrialize the United States. The debt reached such a critical mass that the American economy is going to begin to look more and more like Germany in the 1920s under its reparation debt or England and France under their inter-ally war debts to the United States for which they depended on German reparation to pay.
There’s no way in which this idealized free market economy can be created, a real free market economy, without not only taking away the property rights for rent extraction, but you have to have a clean slate. That was the German economic miracle in 1948. They canceled all of the debts. It was easy for them to do politically because most of the debts in Germany were owed to the former Nazis and nobody wanted them to have the money. Hard to do in the United States. And you’re having Congress even fighting against writing off the student debt. But not only student debt should be written off, but suppose you wrote off all debts. The advantage of writing off debts is not merely to free the debtors from having to pay. It’s if you wipe out the debts, you wipe out the savings of the 1%. It’s the 1% that are the parasites. The 1% are the new feudal lord of the society. You want to wipe out the savings that are the counterpart to these debts.
So there are two parts to the balance sheet. They’re the assets and the liabilities. By wiping out the liabilities of homeowners, you wipe out at the same time all of their debts. Now, obviously you wouldn’t want this to create a new absentee ownership of landlords, make them venerate. So the debts that are written off for the mortgages in the houses would be replaced by a property tax that would absorb not 43% of the homeowner’s income, but let’s say 20, 25%. You would reset the debt in proportion to the ability to pay. So by writing down the debts, the aim of any reform to make an economy resilient has to lie in bringing debts back within the ability to pay. That cannot be done bit by bit. It has to be done in a quantum leap. And that requires certainly an intellectual revolution. And given the fact that the 1% is now highly militarized and vicious, it requires a political revolution as well. And it may be in other countries of Europe, this usually is involved force.
That’s what people don’t want to recognize, that if you view the economy in the way that I viewed it, and the objective of economic reform is to get rid of economic rent, and the economic rent has been siphoning off, transforming wages and industrial profits into interest payments and financial wealth of the creditors into creditor claims on the economy. Now the problem is not like the 19th century. It’s not landlord claims on the economy, it’s hereditary financial claims on the economy. You have to do for finance what the 19th century did for the landlord class. You have to get rid of the property rights of finance that have resulted in privatizing the financial and the banking system in a predatory, unproductive way. And that requires a death cancellation. You can see that most clearly for the global South countries, Latin America, Africa, Southeast Asia. That’s what they’re talking about in de-dollarization today. But it’s also needed for the United States and Europe itself. Without a debt breakdown and a debt cancellation, economics in the West have come to a dead end.
Robinson: Well, all of this to me points to one question that you just briefly mentioned and that’s how can these issues actually be resolved? And so if powerful financial interests in effect control the government as we witness through lobbying efforts all the time, and they would stand to lose tremendously if the government shifted the tax code the way you proposed and writes off debt the way that you’ve proposed, then what chance is there for change? Is the only realistic chance of a violent revolution? I mean, you just said force, but they’re the same thing.
Michael: Right. Well, in the short term, this is not going to happen. But let’s look at 10 or 20 years ahead. Suppose that the BRICS plus China, Asia and its economic revolution that it’s trying to bring to South America and Africa…. Suppose that the United States and the West see that the mixed economy, the socialist economy is growing way ahead technologically living standard, culturally, while they’re shrinking in the United States and Europe, they will have the same choice that Europe had. Somehow Europe, despite being dominated by the feudal landlord class, ended up reforming itself and moving towards socialism up until World War I. It was able to do it in the 19th century. That can happen again in the West. The revolutions after World War I were violent in Europe. Even the 1848 revolution was somewhat violent. The Paris Commune was violent. There will be some violence.
Basically, the United States is at the root of violence. The United States has said is the head of the CIA put it, murder, ink. The University of Chicago free market made it very clear in Chile. They said you cannot have a free market unless you close down every university that teaches economics in Chile and replace it with us. You have to be willing to assassinate and kill every labor union leader. You have to kill every land reformist. You have to kill every university professor that says there is an alternative. You have to kill every progressive. If you’re not willing to kill the intellectual elite of the population, if you’re not able to have a mass murder, such as we worked in Chile, Argentina, and all throughout Latin America, then you’re not going to have a free market, making it free for us to take whatever we want from the economy and smash it to pieces.
Read it all: https://www.unz.com/mhudson/neoliberalism-industrial-capitalism-and-the-rise-of-debt/
